The Myth of Affordable Housing

A preamble (that feels necessary): Housing is a human right. I would like to implore the reader who *might* get partway through this and think I am not in support of housing being affordable for people living in poverty to finish the whole article. Solving the housing crisis should be one of the top priorities for the city, I just believe the current approach isn’t going to work.

Hearing about almost any new high-end housing development in Ottawa—whether it’s a proposed tower in Centretown or a mid-rise in Westboro—housing advocates will often share the same sentiment, which usually goes something like this:

“Why are they building more luxury condos? We need affordable housing!”

It’s a sentiment that feels intuitively right. We look at the sticker price of a new build, see an eye-watering number we know families with a lower income could never afford, and shake our heads. Nobody who really needs a home can even afford that. Why isn’t any affordable housing being built?

But here is the uncomfortable truth: trying to fix the housing crisis by mandating “Affordable Housing” is a bit like trying to fix hunger by taxing grocery stores more. It sounds noble, but in practice, it often ensures that the only people who get fed are the rich and the very lucky, while the middle class and those living in poverty are left starving.

The Capital “A” Trap

The confusion starts with language. We use two terms interchangeably that actually mean completely different things.

“Affordable Housing” (Capital A) is a specific term for housing units, typically in new builds. It is subsidized, income-restricted housing. Because there are so few of these, it’s effectively a lottery ticket. When a politician promises “100 units of Affordable housing,” they are promising deep subsidies for 100 specific people or families. That is a necessary part of a social safety net, but it is not a housing market strategy.

“Housing affordability” (lower case a) is what we actually want. This is a state where the average family can afford the average home without drowning in debt.

You cannot build your way to widespread affordability by building only subsidized units. It’s a math problem. Subsidized units make up a tiny fraction of our housing stock. The price of almost all housing units is determined by supply and demand. And right now, we are failing at the supply part because we are obsessed with making sure as much housing is “Affordable” as possible.

How Filtering Actually Works

We need to be more honest about what new housing should be. New housing is almost always expensive to build. Between land costs, materials, labour, and development charges, it is virtually impossible to build a brand-new “cheap” apartment without massive subsidies.

But building expensive new housing is still the most effective way to create cheap older housing. This process is called Filtering.

Imagine a new luxury apartment building goes up. The people moving into those units aren’t appearing out of thin air. They are moving from somewhere else.

1. A wealthier couple moves into the new luxury unit.
2. They vacate their older, slightly dated townhouse.
3. A middle-income family moves into that townhouse.
4. They vacate their basement suite or older rental apartment.
5. A lower-income individual moves into that affordable unit.

One new “luxury” unit creates a chain reaction of vacancies that helps everyone down the ladder.

The problem in Orleans—and Ottawa or the rest of North America generally—is that we have broken this chain. Because of an obsession with “Affordable” housing, new construction can get blocked because it doesn’t have subsidized units, and so people who would move into higher-end new units don’t have anywhere to go. Since these people can’t move into new high-end units even if they want to and could afford it, they stay put. Or worse, they go out and bid even more on the existing housing stock.

This is why a 1980s 3-4 bedroom home in Convent Glen that hasn’t been renovated in decades is suddenly selling for nearly a million dollars. The rich people in the community want a change, but don’t want to leave. Now they’ve just started outbidding the middle class for old houses because we made it illegal to build new and different types of housing.

The ‘Tax’ That Drags Down Housing Projects

This brings us to back to “Affordable” housing —the policy of forcing developers to sell a percentage of units below cost.

On paper, this looks like a win. The city gets cheap units without spending tax dollars. But economics is like physics: energy doesn’t disappear, it just transfers. The cost of those cheap units is essentially a tax on the development.

To make the project pencil out, the developer has to raise the price on the market-rate units. We are effectively asking new homebuyers—young families, immigrants, downsizers—to subsidize the Affordable units. We are squeezing the middle to pay for the those who have less, while the owners of existing multi-million dollar homes aren’t contributing to the system at all.

If the market is hot enough, this “tax” just makes market-rate housing more expensive. But if the market is marginal—like it often is in the suburbs—the tax kills the project entirely. The developer looks at their spreadsheets, sees no profit, and walks away.

The result? Zero Affordable units, zero market units, and a continued shortage that drives prices up for everyone.

The Solution is Abundance

If we want housing to be truly affordable (not just “Affordable”), we need it to be abundant. We need to stop fearing “luxury” supply and start fearing scarcity.

We need to make it easier for and incentivize property owners to fill in the “Missing Middle,” especially when the alternative is relying only on professional developers. We should be allowing triplexes, fourplexes, and small apartment buildings by right in every neighbourhood in Ottawa (a shift to more denser housing). We need to let homeowners convert garages into suites without a wading through a sea of red tape.

We need to flood the market with new housing options so that older units naturally filter down to become affordable on their own, not by force. This isn’t as politically advantageous as cutting a ribbon in front of a building with a few subsidized units, but it’s the only way to build a city that is truly open to everyone.